Thursday, June 9, 2011

The logic of lifting the debt limit -- June 9, 2011 column

A large majority of people believe the nation’s economy would tank if Congress fails to raise the debt ceiling. It follows logically that a large majority would favor raising the debt ceiling.

Forget logic. Barely half of Americans favor raising the debt limit, even if Congress also sharply cuts spending. That sobering news in The Washington Post appeared under the headline: “Americans are conflicted about raising the debt limit.”

What? “Americans have a collective death wish about the economy” wouldn’t fit on the page?

Seventy-one percent of people thought failing to raise the debt limit would cause serious harm to the economy, but only 51 percent supported raising the limit while making deep spending cuts, according to the latest Washington Post-ABC News poll.

People have heard the dire warnings about what happens if we default on our financial obligations -- and they just don’t care? Are they really saying, “Let’s throw the economy under the train right now. It’s still weak and won’t put up much of a fight”?

I don’t think so, not for a minute. Nobody wants the economy to fail. People are desperate for jobs and economic security. Something else must be going on. Another response in the Post survey crystallized the political problem behind the debt ceiling question.

Asked which political party would do a better job coping with the big problems facing the country over the next few years, one person in five volunteered “neither.” Neither. That’s harsh. And entirely logical.

Neither party has come through the last couple of years dusted in gold. Overall, people trust Democrats more than Republicans, 41 percent to 32 percent, the poll found, but Democrats can't feel good knowing only two people in five have confidence in them.

Washington exists in a parallel universe where the drama concerns how deeply to slash spending and remake government. Poll after poll shows there’s no great appetite in the country for the kinds of big programmatic changes being considered. People favor spending about the same for Medicare and Medicaid.

Interestingly, seniors oppose the Medicare restructuring passed by House Republicans even though they’d be protected and the changes would affect only younger retirees.

I’m not saying we can’t think of worthy cuts. But we know, if we think about it, that each cut comes with a cost.

The federal workforce? Pluck that low-hanging fruit. We surely don’t need so many bureaucrats, uh, unless they’re the physicians and scientists at the National Institutes of Health curing cancer. Them we need.

Waste, fraud and abuse? Our old friends. We should stamp out all three, absolutely, and every administration tries. Even the Pentagon isn’t buying $600 toilets and $400 hammers anymore.

The home mortgage interest deduction is a classic example of how difficult it is to curb tax expenditures, the tax code’s revenue losers. President Obama and his bipartisan fiscal commission proposed scaling back the deduction. It’s logical as the deduction is costly and favors wealthier taxpayers.

Some 35 million Americans claim the mortgage deduction, and it will cost the federal government $131 billion in lost revenue in 2012 alone, according to Calvin Johnson, a tax professor at the University of Texas. To take the deduction, though, you have to itemize, and only the top third of wage earners itemize. Two-thirds of taxpayers aren’t even eligible for the break.

Johnson also told David Kocieniewski of The New York Times last year, “No one can make a serious intellectual argument in favor of the mortgage interest deduction.” And he said, “Why should the government subsidize homeowners rather than renters? The only thing it’s good for is middle-class votes.”

Not exactly. The housing industry has suffered a lot over the last few years, and this hardly is the time to add economic stress. The National Association of Home Builders has a Web effort savemymortgageinterestdeduction.com. Rep. Gary G. Miller, R-Calif., introduced a sense of the Congress resolution that says the deduction should be left unrestricted. More than 150 cosponsors have signed on.

And there’s this. Asked whether the deduction should be eliminated, 61 percent of Americans said no. This was true even though only 43 percent said they personally took the deduction, a Gallup-USA Today poll found in April.

Like the seniors who want to preserve Medicare for their younger friends and relatives, people who don’t take the mortgage deduction want others to benefit. We’re all in this together.